OREANDA-NEWS. US refiners are cranking out record volumes of gasoline, driven by stout gasoline demand and strong margins.

Backwardated Nymex gasoline futures and a contango structured diesel market indicate the crack spreads should remain robust through the end of the year.

However, high domestic demand for gasoline could tail off. Consumption has been subsiding since the tail-end of June, according to Energy Information Administration (EIA) data. Demand has likely peaked for the year, sentiment echoed in the backwardated structure Nymex RBOB futures contracts heading into fall.

Lower US gasoline prices drove demand to record highs and turned 2015 into a profitable year for refiners.

Sinking crude prices have largely been the driver of cheap gasoline. The WTI contract hit a low of the year in mid-March at $43.46/bl after builds of record crude inventories before climbing back up to a high of $61.43/bl in early June. The contract has averaged $52.86/bl so far in July, well below the $100/bl mark that characterized first half of 2014.

The 3-2-1 crack spread for refiners is averaging $22/bl so far in 2015. The strength has been impressive with the US Gulf coast opening the year with a $3 crack and the west coast recently hitting a July peak in excess of $63/bl.

Favorable growth in refiner crack spread margins began in early February and extended through mid-year. Strong margins have led to a record amount of crude processing for US refiners. Utilization rates for refinery crude units have held above 90pc since the first week of April and were 95.3pc in the most recent EIA data.

Gasoline demand was strong in the first half of 2015, a 3.9pc increase from 2014. US drivers tallied a record of 988bn driven miles during the first four months of 2015, surpassing the record set back in 2007 of 966bn miles, according to the US Federal Highway Administration.

Outright gasoline prices for 2015 were near 90?/USG below 2014 levels for New York Harbor and the Gulf coast markets. Midcontinent prices were 80?/USG cheaper while West coast was just 40?/USG, buoyed by some supply disruption induced price shocks.

Domestic gasoline stocks have been supported by the increase in production and soared to record estimates back in February at 243.1mn bl. Inventories have since declined but remain 4pc higher when compared to 2014 gasoline stocks.

Gulf coast refiners had looked towards the export market to shed excess stocks and continue the overall trend for a movement to net exportation of refined products in the US. Gasoline exports were at an all-time high for the first quarter of the 2015 calendar year, but appear to have dropped in-line with the 5-year average in the most recent EIA export data for April.

The west coast market turned unpredictable in July. Downed refinery units and sudden surge in demand for gasoline in Mexico caused prices there to spike.

Margins for Los Angeles CARBOB gasoline rocketed to their highest levels in over three years amid refinery maintenance and Mexican supply shortages that lured away waterborne cargoes. Deals were completed from 100-135?/USG over the August Nymex RBOB, a level not reached against the Nymex mark since October 2012.